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One month ago, on 9 April, investors were digesting an 11% drop in the FTSE 100 in just seven days.
In case anyone missed that, this sharp fall was triggered by President Trump’s ‘Liberation Day’ tariff announcement on 2 April.
At the time, I didn’t expect the market to be back in positive territory within a few weeks. But that’s where we are. A £10,000 investment in the FTSE 100 on 2 January would have been worth £10,620 at market close on 7 May, including dividends.
Admittedly, the FTSE 100 is still below the highs seen in March. But a 6.2% return in just over four months is not a bad result in my view. I’d chalk this up as a win for taking a long-term approach.
A FTSE stock to consider buying
When a stock index like the FTSE 100 moves up or down, it’s usually reflecting a much wider range of individual share price movements within the index.
We’ve certainly seen that this year. The top riser in the FTSE 100 so far this year is up by more than 70%. The biggest faller is down by nearly 30%.
The opportunity for stock-picking investors is to find shares that have a positive outlook and are still cheap enough to deliver further gains.
One company I think fits this description is Lloyds Banking Group (LSE: LLOY).
Lloyds shares are up by a healthy 33% so far this year, but in my view, there are some good reasons to consider this stock as a possible buy.
Positioned for long-term growth?
As the UK’s largest mortgage lender, Lloyds could benefit from any upturn in the housing market. This week’s Bank of England interest rate cut could help to improve mortgage affordability and encourage homebuyers to commit to new deals.
Looking further ahead, the bank is also working to expand its market share in areas that are less dependent on interest income. These include wealth management and commercial banking services.
Perhaps the main risk right now is Lloyds’ exposure to the FCA’s motor finance commission review. Lloyds has a big presence in this sector through its Black Horse business. Management has already set aside £1.15bn to meet potential compensation costs and extra overheads.
I’m confident the bank will be able to manage any likely costs. But until we get the Supreme Court decision on commission payments that were made without customers’ consent, it’s impossible to know the likely impact.
The right time to buy?
Warren Buffett once said, “The future is never clear; you pay a very high price in the stock market for a cheery consensus”.
What Buffett meant was that when everyone is happy and optimistic about a business, it’s often already very expensive.
Lloyds shares aren’t as cheap as they were in January. But the bank’s balance sheet looks healthy to me, and my sums suggest the 5% dividend yield should be safe.
Analysts expect the dividend to rise by a chunky 20% in 2026 – if correct, that could give a 6% yield on shares bought at current levels.
On balance, I think Lloyds shares remain attractive and are worth considering as a possible buy for income investors.
